Later this year, Google (GOOG, GOOGL) will stop using third-party cookies through its Chrome browser, a technology that can track users across websites and serve them personalized ads. This transition will not be painless.
While Google’s move is intended to protect users’ privacy, many of the sites they rely on and cherish may be in jeopardy as a result. The move represents a profound reshaping of the advertising world and the internet user experience.
“The open web is going to be impacted,” said Anthony Katsur, CEO of ad tech industry group IAB Technology Labs. “The long tail of the web, the mid-sized and small publishers, are going to be greatly impacted. “
Many people are well aware that the internet they experience is based on what each provider thinks they want to see. For marketers and businesses, the ability to infer what users might want creates value. As targeting becomes more precise, ads can become more relevant to the audience.
However, without third-party cookies, businesses don’t know much about who their audience is. That could reduce their ability to make money from ads, making it harder to publish content for free without forcing users to hand over their emails or phone numbers.
Chrome accounts for 60% of global Internet traffic and is the last major browser to allow third-party cookies. For years, Apple’s (AAPL) Safari and Mozilla’s Firefox have blocked third-party cookies by default. But their market share pales in comparison to Google’s. Although more advertising revenue flows to Chrome after Safari and Mozilla enable greater privacy protection, once Chrome bids farewell to cookies, there will be no other browser to rely on in the advertising market.
As a result, websites that rely on advertising on the open Internet may struggle to survive. Users may be exposed to more ads that they are not interested in as sites try to make up for the loss in value by serving more ads.
Karsten Weide, principal analyst at W Media Research, said some publishers may suffer revenue losses of 20% to 40% as the deprecation of third-party cookies reduces the effectiveness of advertising. “Generally speaking, various websites will close or reduce the content they can offer,” he said. “The irony is that while this is meant to protect users, it ends up being worse for users.”
Experts believe the end of third-party cookies could also worsen consumer privacy by further standardizing fine-grained data collection in some ways. As more businesses direct people to log in in lieu of cookie-enabled data collection, user profiles will become more detailed and focused, essentially replacing one mode of surveillance with another.
Some of the changes Google expects to take place in the second half of 2024 will bring new privacy-preserving technologies and provide alternative ways for websites to serve relevant ads.Google tells Yahoo Finance it’s confident in its new tool will enable developers to recover much of the losses that would occur without third-party cookies. One of the new targeting methods groups people into larger groups based on their web browsing activity. The technology does not identify users individually but places them together with others who may have similar interests.
In response to criticism that the tools don’t work as well as third-party cookies, Google said the privacy initiative was never intended to replace all functionality in the market that is built on top of third-party cookies. Google also touted the privacy initiative as a collaboration with other ad industry players, regulators and consumer advocates. “No other browser has attempted to offer such a range of solutions to the industry, let alone provided public consultation with stakeholders before making changes,” the company said.
But change will come.
Many online giants will be better able to respond to this overhaul. Tech giants like Meta (META), Apple, and Amazon (AMZN) have built their own walled gardens that allow them to gain insights into their users’ needs and behaviors. Some major media companies and publishers with large followings can rely on subscription and app ecosystems. They have a direct relationship with users via email and login, allowing them to generate revenue directly from their audience and follow a richer data stream without using cookies.
For many others, striking a different balance when it comes to user privacy could trigger an extinction event. This is especially true for sites already under pressure from declining traffic, economic volatility and the looming threat of AI-led transformation. As the death of the cookie creates a void and a scramble for what comes next, the perception that ad dollars are better spent on trillion-dollar tech companies is likely to intensify.
“Advertisers tend to be hesitant when there’s uncertainty,” said Evelyn Mitchell-Wolf, senior analyst at eMarketer. “Ad spend isn’t going to go down; Where.”
Hamza Shaban is a reporter covering markets and economics at Yahoo Finance.Follow Hamza on Twitter @hshaban.
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